Nerves will be tested on the Australian share-market next week amid doubts about the US economy but a major correction is unlikely and domestic fundamentals remain sound, dealers said on Friday.
For the week ended May 11, the benchmark S&P/ASX 200 fell 7.5 points or 0.12 percent to 6,297.4 as weak US retail figures wiped out the gains that led to record closes Monday, Wednesday and Thursday.
Market watchers are expected to keep a close eye on Qantas following a botched take-over attempt by a private equity consortium and the resources sector as rumours continue to circulate about a possible BHP Billiton bid for Rio Tinto.
AMP Capital Investors chief economist Shane Oliver said the Australian market should remain stable, although a slight fall was possible.
"Although shares are at risk of a further pullback in the short term on the back of renewed worries about the US economy, a significant correction is unlikely and the broad trend is likely to remain up," he said. "Valuations are still not stretched, profit growth remains solid, while the US economy is weak the rest of the world is sound, the prospect of lower interest rates in the US will help support shares and push price-earnings multiples higher.
"While memories of last year's correction, which started in May and saw US shares fall eight percent and Australian shares fall 12 percent, are fresh, a repeat is unlikely this month because the correction in February this year has already helped markets let off a bit of steam.
"The next decent share market correction is more likely to be around August/September which is normally the weakest period of the year." No major data releases or company results are scheduled for next week.